Iran won’t consider suspending its nuclear research before the UN’s Aug. 31 deadline, foreign ministry spokesman Hamid Reza Asefi said yesterday. The UN Security Council has threatened to impose economic sanctions on the Middle East nation, which pumps almost four percent of the world’s crude oil.
“This is a substantial risk factor, because Iran isn’t going to back off their nuclear enrichment program,” said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd. in Hong Kong. “There may be disruption to supply if there is a clash between the UN and Iran.”
Crude oil for September delivery rose as much as 51 cents, or 0.7 percent, to $71.65 a barrel, in after-hours electronic trading on the New York Mercantile Exchange at 2:02 p.m. in Singapore, 9.5 percent higher than a year ago. The contract expires tomorrow.
Iran, which says it has the right to develop nuclear power for electricity generation, will formally respond to a package of incentives offered by the council on Aug. 22, President Mahmoud Ahmadinejad said last week. Foreign Ministry spokesman Asefi didn’t say whether Iran would retaliate to sanctions.
Supreme Leader Ayatollah Ali Khamenei, Iran’s top decision maker, said June 4 that the U.S. could “seriously endanger energy flow in the region” by acting against Iran’s nuclear program. Two weeks later, Oil Minister Kazem Vaziri-Hameneh was more specific, saying Iran would use “all available means, including oil” if its “interests” came under attack.
Strait of Hormuz
Brent crude oil for October settlement rose 42 cents, or 0.6 percent, to $72.72 a barrel at 2:04 p.m. Singapore time on London’s ICE Futures exchange.
About 17 million barrels a day of oil, or a fifth of the world’s consumption, flows from the Persian Gulf region through the Strait of Hormuz, the 21-mile wide waterway between Iran and Oman that separates the Persian Gulf from the Indian Ocean
“It’s a bit hard to see an end-point to the risk” from the dispute, said Tobin Gorey, commodity analyst at Commonwealth Bank of Australia Ltd. in Sydney. “The Iranian’s haven’t said anything sounding particularly conciliatory” and the UN will take weeks to agree action among its members, he said.
A raid yesterday by Israeli forces on Iranian-backed Hezbollah in Lebanon violated a cease-fire agreement and “endangers the fragile calm” in the Middle East, the UN said.
Record Prices
Israel said yesterday its special forces conducted the raid to prevent arms being smuggled to Hezbollah, designated a terrorist group by the U.S. and Israel, from Iran and Syria, five days after a UN-brokered cease-fire came into effect.
Oil reached a record $78.40 a barrel on July 14 on concern fighting between Israeli forces and Hezbollah in Lebanon may spread in the region.
Prices fell 4.3 percent last week after the UN brokered a cease-fire in Lebanon and reports showed gasoline demand in the U.S., the world’s biggest oil user, fell for the first time in four weeks.
Oil rose $1.08, or 1.5 percent, to $71.14 a barrel on Aug. 18, the first gain in five days. Prices rebounded after falling to $69.60 earlier in the session, the lowest intraday price since June 21.
Oil fell below $70 a barrel after the University of Michigan’s index of U.S. consumer confidence unexpectedly fell to its lowest level since October.
While slower growth in the U.S. “may undermine the market a little bit,” the weakness in the economy is not pronounced enough for investors to push oil prices lower in the face of the risks in the Middle East, Gorey said.
